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British Banks Face £390Bn 'funding Gap'

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7901326/British-banks-face-390bn-funding-gap.html

British banks face a funding crunch next year as they attempt to refinance debt amounting to double the amount they raised on average during the years of the credit boom.

Banks must raise about £390bn in new debt in 2011, or more than £30bn every month just to replace their existing funding as they are hit by a combination of maturing bonds and the closure of major Government-guaranteed financing schemes.While the banks of other major European countries, such as France, Germany and Italy, face their own funding issues next year, none has to refinance anything like the same amount as the UK banks, which must replace debt worth just over 200pc of the average raised in the years 2005 to 2007.

Nomura analysts in a presentation yesterday, pointed to last month's Bank of England Financial Stability Report (FSR) as they warned of the funding crunch facing the UK's major banks.

"UK banks face significant refinancing requirements over the next few years, as funds raised prior to the credit crisis mature," said Robert Law, co-head of banking research at Nomura.

"Lloyds and RBS are undertaking substantial medium-term restructuring of their balance sheets. This target includes targets to reduce assets in nominal terms over five years.

"In our view, this restructuring is partly aimed at managing their refinancing requirements, as well as reducing wholesale funding an particularly the proportion of short-term financing within that."

Of the £390bn that must be raised next year, about £200bn will be in the form of maturing bonds and residential-backed mortgage securities that will require refinancing.

The remaining £190bn consists of Government funding programmes; the Credit Guarantee Scheme; and the Special Liquidity Scheme, which the Bank of England insists will be phased out by the end of 2012.

Mr Laws at Nomura is sceptical that Britain's banks will be able to wean themselves off Government support so quickly, but concedes that the authorities cannot let up the pressure on UK financial institutions to become fully-privately funded.

In the FSR the Bank of England admitted that replacing all this funding would be a "substantial challenge", and put the total figure on the amount that UK banks need to refinance by the end of 2012 at between £750bn and £800bn, working out an average monthly fundraising rate for the next two and a half years of more than £25bn.

This is double the fund raising rate for the years between 2001 and 2007 of £12bn.

Raising this money will come against a much tougher backdrop for the banking industry, which though improved from the months immediately following the financial crisis of late 2008, is still far from the easy money years of the credit boom.

Still it's contained thank god the banks aren't competing with others for this funding.

The short term liquidity scheme about to become the long term liquidity scheme?

So during the boom period they needed £12bn a month now they suddenly need to raise £25bn a month...

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http://www.telegraph...unding-gap.html

Still it's contained thank god the banks aren't competing with others for this funding.

The short term liquidity scheme about to become the long term liquidity scheme?

So during the boom period they needed £12bn a month now they suddenly need to raise £25bn a month...

its no problem at all, all we need is £390bn of extra excess wealth creation and savers will finance this without a thought.

course, selling mortgages creates no wealth...just adds to the borrowing requirement of the lending bank.

selling insurance services creates no wealth, as insurance is just a bet on an event occuring, or not...money just changes hands less fees.

Just wondering what wealth creation is going to be lost if a few banks close?

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The banks have known this is coming since the SLS/CGS were started. Their rollover liabilities are completely predictable.

So why the **** has net mortgage lending been positive every month since. This strikes me as either:

1 - monumental stupidity, they want to go bust

2 - brinkmanship with the government to extend the support schemes

IMO, if the banks want to survive, net mortgage lending has to go negative to the tune of £20bn per month for at least the next two years. I wonder if that is even possible without hiking rates and killing the mortgage market completely.

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The banks have known this is coming since the SLS/CGS were started. Their rollover liabilities are completely predictable.

So why the **** has net mortgage lending been positive every month since. This strikes me as either:

1 - monumental stupidity, they want to go bust

2 - brinkmanship with the government to extend the support schemes

IMO, if the banks want to survive, net mortgage lending has to go negative to the tune of £20bn per month for at least the next two years. I wonder if that is even possible without hiking rates and killing the mortgage market completely.

indeed, overall, this is the other way of doing it. cashing in their assets as they amortise at completion.

then there are the defaults to account for too.

of course, to bail them, the money they get comes straight out of the disposable income their potential borrowers have available and the situation is extended but made worse.

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indeed, overall, this is the other way of doing it. cashing in their assets as they amortise at completion.

They can't cash in their mortgage assets whilst payments are being made. All they can do is gouge existing customers and go for zero gross mortgage lending.

I'll add a bit more to my post above. The banks had predictable rollover committments and control over new lending. Failure to deal with this is beyond reckless. Are they just hoping a few hundred £billion will just turn up?

In the meantime, the banks will be forced to pay the higher fees and haircuts involved with the discount window facility. I hope the goverment(taxpayer) makes a big fat profit out of this.

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Probably the real reason they've killed off NS&I. Give the commercial banks the chance to get thir hands on some retail deposits they wouldn't otherwise of had...

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When you only have a hammer, every problem looks like a nail. When you only have a printing press...

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Probably the real reason they've killed off NS&I. Give the commercial banks the chance to get thir hands on some retail deposits they wouldn't otherwise of had...

Not exactly going all out with sexy offers to woo savers are they and that would only grow their balance sheets? I take it the banks have lots of property on their books (repo's) still and hoping to continue selling to bigger fools with cash.

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The banks have known this is coming since the SLS/CGS were started. Their rollover liabilities are completely predictable.

So why the **** has net mortgage lending been positive every month since. This strikes me as either:

1 - monumental stupidity, they want to go bust

2 - brinkmanship with the government to extend the support schemes

IMO, if the banks want to survive, net mortgage lending has to go negative to the tune of £20bn per month for at least the next two years. I wonder if that is even possible without hiking rates and killing the mortgage market completely.

The banks are the government. Public services are being cut and taxes increased to preserve the UK credit rating to ensure that we can

raise the money to pay for the next banking bailout. You can only understand the way the banks behave when you accept the premise that our political system has been (willingly) hijacked by the bankers.

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Not exactly going all out with sexy offers to woo savers are they and that would only grow their balance sheets? I take it the banks have lots of property on their books (repo's) still and hoping to continue selling to bigger fools with cash.

Looks like NS&I have about £100bn according to this article:

http://www.ft.com/cms/s/2/8d0ec4de-9342-11df-96d5-00144feab49a.html

That's a fair chunk of what the banks are missing...

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"Banks must raise about £390bn in new debt in 2011, or more than £30bn every month just to replace their existing funding as they are hit by a combination of maturing bonds and the closure of major Government-guaranteed financing schemes."

Erm what's that mean? (TBH it's all over my head - the idea of them needing debt to pay back bonds which someone bought with someone's money?)

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Probably the real reason they've killed off NS&I. Give the commercial banks the chance to get thir hands on some retail deposits they wouldn't otherwise of had...

I presume its also because they see massive inflation just over the horizon....

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The banks had predictable rollover committments and control over new lending. Failure to deal with this is beyond reckless. Are they just hoping a few hundred £billion will just turn up?

I would be surprised if they haven't already got the plans for Emergency Weekend Heist Mk II drawn up.

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7901326/British-banks-face-390bn-funding-gap.html

Still it's contained thank god the banks aren't competing with others for this funding.

The short term liquidity scheme about to become the long term liquidity scheme?

So during the boom period they needed £12bn a month now they suddenly need to raise £25bn a month...

Surely it will be the 'Be good to yourself finest range liquid mortgage scheme' ?

Edited by plummet expert

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Looks like NS&I have about £100bn according to this article:

http://www.ft.com/cms/s/2/8d0ec4de-9342-11df-96d5-00144feab49a.html

That's a fair chunk of what the banks are missing...

but NS&I money goes to goverment funding (borrowing). If that disappeared then the government will have to look for another 100bn itself, so the problem just moves elsewhere.

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The banks have known this is coming since the SLS/CGS were started. Their rollover liabilities are completely predictable.

So why the **** has net mortgage lending been positive every month since.

I'm glad you made this point, I've been wondering the exact same thing myself - where is the money coming from? The banks have got an epic (impossible?) amount of deleveraging to do and they haven't even started.

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"Banks must raise about £390bn in new debt in 2011, or more than £30bn every month just to replace their existing funding as they are hit by a combination of maturing bonds and the closure of major Government-guaranteed financing schemes."

Erm what's that mean? (TBH it's all over my head - the idea of them needing debt to pay back bonds which someone bought with someone's money?)

The banks swapped assets (including mortgage securities of uncertain value) for government gilts form the BoE that could be used as security for funding.

The BoE want to end the scheme, getting the gilts back and returning the assets to the bank where they belong.

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Why is interst rates so low?

The debts are real, money is short , so whats going on?

Ireland sold of a heap of bonds yesterday with on problems even after it was down graded to AA-2, I think.

Were are the so called bond vigalanties?

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I'm glad you made this point, I've been wondering the exact same thing myself - where is the money coming from? The banks have got an epic (impossible?) amount of deleveraging to do and they haven't even started.

QE money? To keep housing market pumped, but avoiding hyperinflation in wider economy (providing MEW is restricted)? :unsure:

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When and what was Emergency Weekend Heist Mk I?

It was the round-the-clock negotiations of 6-8 October 2008:

http://www.independent.co.uk/news/uk/politics/the-great-balti-bailout-955489.html

Which led to a £1.4tn bailout package for the banks:

http://news.bbc.co.uk/1/hi/business/8241480.stm

Sorry I got it slightly wrong, the British talks weren't at the weekend, I think I was thinking of one of the American crisis talks.

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Banks face increased funding gap=more competition for savers=higher savings returns?

Not when your biggest depositor is the government. I'll eat my hat if the SLS is closed down by the end of 2012.

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Not when your biggest depositor is the government. I'll eat my hat if the SLS is closed down by the end of 2012.

OT but has anyone pulled an FOI request to see what the BoE got for its "money" from the banks?

Edited by Sir John Steed

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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